Ingram Micro 1999 Annual Report Download - page 26

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Ingram Micro
Annual Report
income from operations decreased as a percentage of net sales to 1.4% in 1998 from 1.9% in 1997, primarily due to currency
devaluations and overall weaker economies in Latin America.
Other expense, net, consisting primarily of interest, foreign currency exchange losses and miscellaneous nonoperating expenses,
increased 59.2% to $79.7 million in 1998 from $50.1 million in 1997. Other expense, net, also increased as a percentage of net sales
to 0.4% in 1998 from 0.3% in 1997.Toward the end of 1998, the Company’s interest expense grew as a result of increased borrow-
ings to finance acquisitions and strategic investments; expansion of the Company’s business; ongoing sales growth; and maintenance
of higher accounts receivable levels. Accounts receivable levels were higher primarily due to a reduction in master reseller sales as
a percentage of total sales and due to the changing vendor terms and conditions associated with floor plan financing arrangements
of those sales.The increase in other expense also reflects an increase in foreign currency exchange losses primarily attributable to
ongoing international economic conditions that led to weaker currencies in Latin America as compared to the U.S. dollar.
The provision for income taxes increased 23.0% to $161.7 million in 1998 from $131.5 million in 1997, reflecting the 24.6%
increase in the Company’s income before income taxes.The Company’s effective tax rate was 39.7% in 1998 compared to 40.3%
in 1997.The decrease in the effective tax rate was primarily due to the reduction in a noncash compensation charge, much of which
is not deductible for tax purposes, as well as the effect of certain international taxes in 1998.
Quarterly Data; Seasonality
The Company’s quarterly operating results have fluctuated significantly in the past and will likely continue to do so in the
future as a result of seasonal variations in the demand for the products and services offered by the Company; competitive conditions
including pricing; variation in the amount of provisions for excess and obsolete inventory, vendor sponsored programs and doubtful
accounts; changes in the level of operating expenses; the impact of acquisitions; the introduction of new hardware and software
technologies and products and services offering improved features and functionality by the Company and its competitors; the loss
or consolidation of a significant supplier or customer; product supply constraints; interest rate fluctuations; currency fluctuations;
and general economic conditions.The Company’s narrow operating margins may magnify the impact of these factors on the
Company’s operating results. Specific historical seasonal variations in the Company’s operating results have included a reduction
of demand in Europe during the summer months, increased Canadian government purchasing in the first quarter, and worldwide
pre-holiday stocking in the retail channel during the September-to-November period. In addition, the product cycle of major
products may materially impact the Company’s business, financial condition, or results of operations.
The following table sets forth certain unaudited quarterly historical financial data for each of the eight quarters in the period
ended January 1, 2000.This unaudited quarterly information has been prepared on the same basis as the annual information pre-
sented elsewhere herein and, in the Company’s opinion, includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the selected quarterly information.This information should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this Annual Report to Shareowners.The operating results
for any quarter shown are not necessarily indicative of results for any future period.